Secrecy only breeds suspicion

Last week, international campaigner Global Witness released a report exposing the details of some of the ‘secret’ contracts the Uganda government has with the international oil companies operating in the country.

For people who have been closely following events in Uganda’s oil and gas sector for a while, the contents of these contracts, commonly called Production Sharing Agreements (PSAs), were not that secret as bits and pieces have been finding their way into the public domain, some by accident but others through deliberate efforts of different stakeholders.

However, this Global Witness Report is by far the most detailed step-by-step analysis of the agreements the country has with the oil companies.

It confirms what several industry experts, including some employees of the oil companies have claimed for some time: Uganda got a good deal, at least compared to many other oil-producing countries.

According to the report, the country stands to retain anywhere from 80 to more than 90 percent of the revenues that will be collected from oil, a considerably high take going by global industry standards.

In addition, the contracts include a favourable revision of the royalty payments the oil companies will make to government to factor in cumulative oil production so that they are not only based on daily production-potentially increasing the government’s earnings. The Uganda government also renegotiated the contentious stabilisation clause to leave room for it to introduce a new tax as production progresses; as well as clearer terms regarding payment of Capital Gains Tax, a potential source of massive income when companies are either selling or acquiring shares in existing oil blocks.

It is therefore surprising that even with all these impressive terms, the government is still unwilling to make these agreements public.

Legislators, Civil Society, Media and others have questioned the motive of keeping PSAs secret, many suspecting that, like it has been in many other sectors over the years, the government could have messed up the oil sector in its infancy.

Some even went as far as petitioning Court, under the Access to Information Act (2005), to compel government to disclose the oil agreements but were unsuccessful as the Court ruled that such disclosure was not in public interest.

Curiously, it appears it is only the Uganda government that sees any benefit in keeping this information secret, not even the international oil companies.

Last year, Tullow’s Group Public Affairs Manager, Lesley Coldham, told a Civil Society meeting in Kampala that disclosure enhances transparency, which in turn boosts the company’s profitability.

“Tullow does not have any problem with the publication of PSAs,” she said. “If the country agrees to have these reports published, we will publish (them). We are happy to do so if the Uganda government allows.”

Yet the government has continued to shut the public out of its dealings with the oil companies, claiming it is protecting the industry’s competitiveness.

“These companies are competing and thus request for protection so that they are not out-run,” argued junior Energy Minister, Peter Lokeris, at a conference in Kampala earlier this year.

But, as Global Witness has demonstrated, most of this information is no longer such a big secret and other surreptitious ones will emerge as leading economies press for more transparency and accountability in the extractives sector.

Both the USA and European Union have introduced laws that compel almost 90 percent of major extractive industry companies to disclose their payments to governments in the countries they operate.

There is no point, therefore, in hoarding information locally, when it can still be accessed, with relative ease, from the mother countries of the oil companies operating in the country.

Ugandans must be given an opportunity to probe the relationship between government and the oil companies and ultimately participate in the sustainable exploitation of their oil and gas resources.

It is truly well said that “Secrecy only breeds suspicion and suspicion breeds contempt.”. I could even add for mineral exploration companies that “and contempt breeds community troubles and lays the ground for otherwise-avoidable conflicts.”

Our experience has been that transparency not only makes very good business sense, as many have said before, but also that one of the best ways of managing peoples’ or local communities’ expectations is to be thoroughly transparent about all aspects exploration and resource development by sharing your own (the project promoter’s or project developer’s) very expectations with them and not assume that these days’ local communities
cannot ‘understand’ – that they will misunderstand and have misguided and overly-optimistic expectations.

I think the truth always sets everyone free or at the least, lays the ground for doing so.